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If you’re about to reach settlement in a personal injury case, your lawyer might have told you that the incoming money could impact your eligibility for needs-based government benefits like Supplemental Security Income (SSI). While speaking with an expert settlement planner is the smart next step, knowing about some of the possible financial planning options can be helpful. For some plaintiffs who are also government program beneficiaries, the simplest solution is to actually spend the settlement money.

Of course, this planning tool should come with a strategy built alongside a professional settlement planner. Below are the basics.

Eligibility for needs-based government benefits programs depends on how much income a person gets. For example, to receive SSI, a person’s “countable resources” must not be worth more than $2,000 per month for an individual or $3,000 per month for a couple. For beneficiaries who have filed a personal injury lawsuit, receiving a settlement can easily push them over the government’s income eligibility threshold. When that happens, they become ineligible for benefits. Using a “spend down” plan can re-qualify a person for those benefits after settlement, however.

Beneficiaries who choose to spend down will do the following: they accept the personal injury settlement, but instead of placing the entire sum of money in a bank, they spend it until they have reached the program’s resources limit.

In a spend down, spending should be limited to resources that do not count toward the program’s resource limit. These items include things like a home, a vehicle, and household goods; limiting spending to these resources should not threaten benefits eligibility. When spending down assets, the resources purchased should be solely for the benefit of the beneficiary.

A spend down approach is typically appropriate for handling smaller settlements. It can also be a good choice for SSI recipients who need to purchase high-value items immediately – as long as those items are not considered countable resources. Beneficiaries must have the correct number and come up with an appropriate plan to successfully spend down. That’s where an experienced settlement planner comes in.

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